- The US dollar index is expected to rise to approximately 97.80 during early Tuesday trading in Asia.
- Ongoing geopolitical tensions are driving safe-haven demand, which is supportive of the US dollar.
- Speculations about potential rate cuts by the Fed might diminish the benefits for DXY.
The US Dollar Index (DXY), which measures the USD against a selection of six major currencies, is projected to recover to nearly 97.80 after losing ground during early Asian trading hours on Tuesday. Attention will turn to the US ISM Manufacturing Purchase Manager Index (PMI) data set to be released later in the day.
After hitting its lowest point since July 28, DXY is likely to rebound, largely due to the continuing tensions between Russia and Ukraine. Reports indicate that around 60,000 customers in Ukraine faced power outages due to Russian drone strikes on energy facilities. In response, Ukrainian President Volodymyr Zelensky has pledged to launch more strikes into Russian territory.
On another note, increasing speculation about a potential resumption of rate cuts by the US Federal Reserve this month could enhance the outlook for the dollar. Current market assessments, according to the CME FedWatch tool, show an almost 89% probability that the Fed will lower rates by 25 basis points at its September policy meeting, with an 85% probability reflected in US Personal Consumption Expenditures (PCE) data.
Meanwhile, traders are gearing up for the upcoming US employment report for August as it might provide fresh insights into the health of the economy and possible interest rate adjustments. The forecast suggests an addition of about 75,000 jobs for August, although the unemployment rate is anticipated to remain relatively high at 4.3% during that time.
